The rumor mill within the San Diego banking industry has been burning up lately, with speculation surrounding First Community Bancorp, parent of Pacific Western Bank.
“The rumor mill has it that Wells (Fargo Bank) is the buyer sometimes, and the next day it’s Wachovia (Bank),” said Larry Hartwig, chief executive of California Community Bank in Escondido. “It’s been going on for a while. When you look at what they did lately , the layoffs, taking out expenses, and cleaning things up after their merger with Community National that bodes that he’s doing what he does.”
The ‘he’ Hartwig refers to is John Eggemeyer, chairman of First Community, and Castle Creek Capital LLC, both of which are based in Rancho Santa Fe. Eggemeyer has a long track record of buying up smaller banks, consolidating them under one entity, and then selling the company to the highest bidder, usually much larger, national banks.
It’s that history combined with the bank’s current stock price, and a sense that the window for cutting a deal may be closing that keeps fueling speculation that a deal is in the works, say several bankers and bank consultants.
“It would make a lot of sense,” said Gary Findley of Anaheim-based The Findley Reports, a monthly banking industry newsletter. “First Community is a big player, and Wachovia is looking for more acquisitions, and this would be one If I (were) Wachovia, this would be one of the entities I’d look at.”
Gary Cady, chief executive of Torrey Pines Bank in Carmel Valley and part of Western Alliance Bancorporation, a holding company in Las Vegas, said given Eggemeyer’s history and reputation, selling to Wachovia or another large bank would be no surprise.
“Clearly, Wachovia has made several public announcements that they want to make a big impact in California,” Cady said. “This would certainly be a logical strategy for both organizations.
Charlotte, N.C.-based Wachovia Bank held $555 billion in assets as of June 30, but its parent, Wachovia Corp., is among the largest financial companies in the nation with nearly $720 billion in assets. Last year, Wachovia acquired Golden West Financial Corp., the parent firm of World Savings, the second-largest savings and loan institution in the nation. It also acquired Westcorp Inc., an Irvine company formerly headed by mega-millionaire San Diegan Ernest Rady, and AmNet Mortgage Inc., based in San Diego and headed by John Robbins.
“They are a big retail bank in other parts of the country, and have said they want to expand their footprint in Southern California,” said Hartwig. “(Wachovia) would be getting a fairly clean organization. There wouldn’t be a lot of mysteries (in the loan portfolio), and the bank has good credit quality.”
First Community completed the acquisition of Community Bancorp, which owned Escondido-based Community National Bank, last year, resulting in the buyer bank adding some $900 million in assets and growing to more than $5.3 billion. Shortly after that deal, First Community rolled up its Los Angeles-based subsidiary bank, Pacific Western National, into its San Diego bank, First National, creating a single bank, Pacific Western Bank, with headquarters in downtown San Diego.
While First Community said the changes were made to save money, some viewed it as positioning the lender to make it look more attractive to potential buyers.
“He’s got it all under one roof now, and dissolved a lot of the corporate expenses that go with running separate banks,” Hartwig said.
For the second quarter, despite it generating $22.5 million in net profits, up 56 percent from the like quarter of 2006, First Community cut 80 positions “because of the slower growth environment.”
Vic Calisi, a former Pacific Western Bank senior vice president now working for San Diego-based 1st Pacific Bank, said he wasn’t aware of negotiations between his former employer and Wachovia, although those rumors have been rampant for months.
“The rumors abounded that the bank was being purchased by somebody, and those rumors are still out there,” Calisi said. “It would make sense for Wachovia or someone like that who’s interested in getting an instant presence in California.”
Bob McCamon, a senior loan officer formerly with Pacific Western and now working at Temecula Valley Bank, said ever since Community National Bank was acquired and merged into Pacific Western, rumors of its sale to another bank were rampant.
“We’ve heard about Wachovia Bank for a heck of a long time, and that’s all it is, rumors. It may be true, or may not be true, but you can’t bank on rumors,” McCamon said.
As of Aug. 15, First Community, traded under FCBP on Nasdaq, closed at $51.57, up 18 cents. During the past 52 weeks, shares have ranged from $48.20 to $58.96.
All this speculation may indeed be just that. According to Wachovia spokeswoman Christy Phillips-Brown in Charlotte, the company never comments on merger rumors or speculation.
However, in a recent conference, Wachovia CEO Ken Thompson responded to a question about future acquisition activity by saying the company has a lot on its plate right now dealing with the integration of Golden West, Phillips-Brown said.
Calls to Eggemeyer and Pacific Western CEO Michael Perdue were not returned for this story.